The end is nigh: A bleak future for Bolivian antimony

By Myles McCormick
Published: Monday, 02 October 2017

Producers foresee little prospect for continued antimony operations in a country that once was a major player in the industry, as regulations strangle business, writes Myles McCormick, IM Correspondent, from La Paz.

"I want to say one word to you, just one word," a neighbour, eager to advise, tells the protagonist in the opening scenes of the 1967 classic, The Graduate. "Are you listening? Plastics. There’s a great future in plastics."

The now-famous line proved prescient. The market for plastics boomed in the latter part of the twentieth century, and with it, demand for antimony trioxide, used to fireproof it. 

Producing countries reaped the rewards. Among them was Bolivia, one of the world’s main sources of the compound. In the late 1980s the country mined one fifth of the world’s antimony and was the leading producer among market economies.

But today, producers in the landlocked South American state say laws and regulations are driving the industry into the ground. Current producers struggle to keep their heads above water as state requirements become ever more exacting. And would-be investors are looking elsewhere, rendering exploration non-existent. 

"In the 1980s things were good," says one major producer, preferring to remain anonymous*. But today the picture is very different. "There are a whole bunch of regulations that are killing the industry."

Increasing costs

"This is my bunker," an antimony producer tells me, leading me into his office. "I am surrounded by reds."
In 2016, Bolivia produced 2,700 tonnes of antimony, almost half the levels of five years previously (See Figure 1). 

The problem, claim producers, is increased regulation and state interference, primarily in the form of a soaring cost of labour, imposed by the current government of President Evo Morales. 

"The labour cost has actually killed the antimony industry," the producer tells me, explaining that new laws require him to pay 15 monthly salaries annually as opposed to the standard 12. This is the result of legal obligations to pay the equivalent of two extra monthly salaries in Christmas bonuses plus a further one month’s extra salary as an obligatory productivity bonus. 

This system of "aguinaldos" is based on the overall productivity of the Bolivian economy. For example, one of them is triggered by the national economy growing by 4.5% in a given year, but this growth may not be applicable to the mining industry generally, or the antimony industry specifically.


"The economy may be growing at 4.5% or more and that may be good for some but not for everybody. So it’s terrible, especially for miners who have a lot of volatility. You are not able to control your costs," says a second producer. 

The labour cost increases began as antimony prices rocketed in the years leading up to 2012, fuelled by Chinese speculation, allowing them to be absorbed to some degree by producers. But when prices began to drop exploration higher labour costs were already installed and remained at their elevated levels. 

These high and sticky labour costs, coupled with falling prices quickly took their toll (See Figure 2). The first producer’s company’s books nose-dived into the red, incurring extensive losses in 2015. 

Large scale voluntary redundancies followed and production was reduced. 

A recently mandated increase of 7% on minimum salary payments has added to this. In real terms 

this pushes up some employment contracts by double this. 

Today, with China once again driving up prices, the company is breaking even, but continued operations have become unviable and its owners plan "una retirada tactica" – a tactical retreat – from the market.

Potosi, the historic capital of Bolivian mining, including antimony.
Antimony production in Bolivia has almost halved since 2012.

source: dani3315 

Legal insecurity

Higher labour costs are not the only issues producers face, however. 

Under a 2015 law, Bolivia has overhauled its mining code. Critically it is now not possible for companies to own mining concessions; rather they hold mining rights.

"Previously, the mining concession was considered like real estate," says an author who has written widely on the subject. "You could sell, lease, pledge, mortgage, promote, get out. If you developed reserves they could be used to get money from the banks. Now you only have mining rights."

Producers were incensed. One notes: "I don’t see the industry recovering in Bolivia, because of this mining law (…) You can’t do anything with the mine. There is total control by the government. They investigate and have the right to cancel all your mining rights."

On top of this, the Bolivian peso’s peg to the US dollar makes exports uncompetitive; a lack of security of tenure exists at mines – locals have been known to take over smaller operations; and taxes are relatively high – 38.5% on profits plus a royalty (in the case of antimony this is 5%).

Foreign investment has as a consequence dried up, he says, with prospectors preferring the more market-friendly conditions of neighbouring countries. 

"There are no economic measures in favour of the mining industry," he says.

The combined effects of high labour costs, the new mining law, weak security of tenure and the dollar peg make Bolivia an unattractive prospect for investors, sceptics argue.

The knock-on effect from this is that no new mines are being opened. Across different mineral groupings, major mines are expected to run their course within the decade. In antimony, there have been no new mines opened in the country for 100 years, when demand for the metal in bullets and batteries spiked during the Great War.   

When current mines are depleted, a lack of exploration today means that there is unlikely to be new production brought on line to replace them, meaning the downward trend in output will continue.

"There is no serious exploration happening that I am aware of (…) Right now we don’t see anything on the horizon that’s going to change this reality," says another producer. At this rate, Bolivia’s role in the antimony market could be completely finished within decades, he adds. Either that or all output will just be from small mines, with very irregular production.

A long way down. Producers say Bolivian antimony production
could be non-existent within decades.
Source: Subbotsky 

The bright side

But this view of Bolivia’s increasing investor-unfriendliness is disputed in some quarters. Fernando Aguirre, a senior partner at Buffete Aguirre Soc Civ, a law firm, expects that following a transition period, markets will see Bolivian mining as an opportunity. 

"Although 11 years of nationalistic government has created some doubts in investors’ minds, there is real interest given the current conditions and the new legal framework, yet to be tested in its final implementation," he explains. 

"We are in a transition with respect to mining. There were 8,000 mining concessions which have to change from concessions to contracts. Many may be abandoned. But this is an area of opportunity for private investment," says Aguirre.

One producer half agrees, noting that if the most recent change in the structure of the mining system is the last, investors might come to see the environment as more stable and reconsider their position on doing business in Bolivia. But this will take time. 

"The hope is that all the changes have already been made, and we certainly hope there are no more, but you never know," he says.


Chinese dominance

In truth, Bolivian antimony production has been in decline for many years. China’s storming of the market since the 1980s and its tendency to dump material has pushed other countries down the pecking order in terms of output. 
The US now produces no antimony trioxide, all of its producers having been driven out of the market in recent years by China, which in 2016 produced 100,000 tonnes in antimony content, over three times the rest of the world’s output combined.

Bolivia too was affected by China’s market takeover (See Figure 1), which accounts for the drop-off in production from highs of 16,500 tpa in the early 1980s. In 2016, Bolivia sat fourth in the global production tables, with output of 3,000 tonnes of antimony content, according to the US Geological Survey (See Figure 4), although government figures put this figure slightly lower, at 2,700 tonnes.

Bolivia’s main producers attempted to negotiate anti-dumping arrangements with China. But these ultimately failed. "They never complied. They would just dump," says a producer.

"Now of course the market is controlled and manipulated by the Chinese production, which is probably 80%," he adds.

Today, companies like Twinkling Star in China have become the market standard and consumers are unwilling to switch from what they know. 

On top of this, the price of Bolivian product has largely tracked China, providing little incentive for buyers to switch. 
One US importer notes he recently considered making the jump to Bolivian product, but decided against it. "The saving wasn’t that attractive, like 3-4%. If you’re talking 8% or even 5% I’d consider it," he says. "Besides, a lot of my customers don’t want to go through the testing procedures (...). It can take a year to change the product they use."

Temporary respite

At present, the price of antimony and antimony trioxide is quite healthy from a global producer’s point of view (See Figure 3).

But this is just allowing Bolivian producers to break even.

And the high prices can be a problem in themselves. Substitution is on the rise. "If [producers] push for such a high price, they will lose more market share against other products," says one producer. 

Driven by restrictions in China, high prices have pushed consumers to seek out alternatives. 

"They can’t replace it 100%, but they can use less. And every time they use less, even here in Argentina, Brazil, I notice that they are using less. Because of the high prices, many said 'maybe we can change our formulas’," he adds.

There is a degree of speculation – or perhaps hope – among some in the antimony industry that Chinese dominance might fade in the coming years.

The deposits of Hunan province are nearing depletion; environmental restrictions in the country could hit some in the Asian powerhouse hard (many lack sulphur dioxide scrubbers); and labour costs in the country are rising fast. 

But even if China begins to loosen its stranglehold over the industry, it may be too late for Bolivia. 

"I don’t want to continue mining and taking risks, and that’s what’s happening to everybody," says one producer. "I don’t see much future in the antimony industry."

"As a consequence of the change of laws, and empowering the unions and all the campesinos, you’ve got too many forces against the mining companies. And the mining companies have no real rights," he says.

He looks out the window of his "bunker". "I call this my final battle," he says. "I hope it’s not like Berlin."

*Various sources for this article requested not to be named, due to the sensitive nature of the topic.

**The Bolivian government provided historical output figures. But no representative was immediately available to comment on the situation generally at the time of writing.